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Craigie - Perth

Discussion in 'Development' started by LloydThomas, 10th Mar, 2016.

  1. LloydThomas

    LloydThomas Active Member

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    25th Oct, 2015
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    Location:
    Melbourne
    Hi to all my Perth developers. What people general opinion about Craigie as a development site.
     
  2. ottg

    ottg Well-Known Member

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    29th Jun, 2015
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    Perth
    Hi @Lloyd - The last time I did a run on the numbers Craigie didn't stand out. Note that I only looked at around the median house price across a range of postal codes. I have attached an extract and compared it against the averages and a specific better comparable area. I then run a weighted selection criteria.
     

    Attached Files:

  3. Cruskits

    Cruskits Well-Known Member

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    Perth
    I just realised that I don't take realestate investing serious enough.... You are on a whole another level ottg.... In a good way
     
  4. sanj

    sanj Well-Known Member

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    craigie like many areas of perth is fairly irrelevant when it comes to it's viability, all that matters is the actual site and your feasibility. unless the suburb has something uncommon going on say like huge lots of subdivisions still going on etc that might make end value predictions a bit harder then just be guided by the feaso.

    If the numbers say it's a good, profitabledeal then seriously consider it, if the margins arent enough then walk away.
     
  5. ramssss

    ramssss Member

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    I'm intrigued with your data driven approach. What is your source for underlying data? Which suburb/postcodes stood out in your model?
     
  6. ottg

    ottg Well-Known Member

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    Perth
    @ramssss - Residex raw data but unfortunately the model is IP.
    @sanj - I should have said it depends on the strategy. If a person develop to flip then any market that has large numbers of house sales can turn a profit under attractive economic conditions. If you develop to keep, you need to consider the long term capital growth and rental yield first. It's in the latter case where you need to determine which state and area offers best fit.

    To filter the 1-3% lucrative cases then in both cases a person need to do a quick back of a napkin feasibility, followed by more detailed feasibility. If it’s still good and before you commit your money, you need to turn the “guesstimates” into facts by doing a detailed cash flow analysis based on inputs from professional consultants and construction companies. This is where a person need to know all the costs, every one of them. I also believe a person need to know how to walk away when the numbers dont stack up.
     
  7. LloydThomas

    LloydThomas Active Member

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    Melbourne
    @ottg love your data driven approach. Do you have any tips in terms of suburbs for a buy and hold strategy? Thanks

    @sanj do you look at your numbers as a return on equity or return on cost?
     
  8. sanj

    sanj Well-Known Member

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    Perth
    both, although typically when people talk about margins it's on a total cost basis. important to also consider time taken and difficulty. eg a 1m project making 20% margins in 12 months might be a better option than a 1m making 30% but taking 2 years and being more work.

    there is no single approach best for everyone, we just have to all remember that capital and time are 2 finite resources and take it into account when making such decisions
     
  9. ottg

    ottg Well-Known Member

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    Perth
    Hi I'm a rookie but here we go. Buy and hold versus develop and keep are closely related. The upfront homework is similar but I will give the latter in more detail (pick what's applicable).
    Have given my approach here: How do you decide on a suburb to develop in
    You first need to determine which state, suburb and areas offers the best growth. My data driven approach is:
    Sort each area per their current median price from maximum to minimum. Select only those areas across a median price range of choice.
    To create a quality grading system based on the measurements available we compare the actual value against the average of the selected group and allocate a score
    Identify the parameters that are most important and apply a weighting factor.
    a. maximum return (growth and rental yield),
    b. rental yield for past year and
    c. the number of sales for last year​
    Identify those parameters that can indicate a fast recovery or exponential recovery or exponential growth.
    a. If the median current value is greater than last year’s median value
    b. when the median rent for last quarter is greater than last year
    c. when rental yield for last year is greater than last 20-years​
    Compare incremental change over a period of time and look for consistency.
    Capital growth
    a. Average for past 20 years, 10 years
    b. Annual growth 5 years ago, 4 years, 3 years, 2 years, last year.​
    Rental yield
    a. Average Rental yield for past 10 years
    b. Average rental yield last year​
    Check if the increment change (capital growth & rental yield) for the past year > 2 years > increment for 3 years > increments for 4 years > increment for 5 years > increments for 10 years > increment for 20 years
    Calculated derivatives of the given core information
    Add all the scores together and rank them accordingly

    You now have a selection of areas. What follows is critical:
    a. Study the zoning, development regulations & Town Plan
    b. Know how to examine other current development professionally (supply)
    c. Know your numbers for the area and market: Average dwelling size sold, average dwelling size for sale, average selling price/sqm, average dwelling development size, average developer cost/sqm (demand)
    d. Compiled unit sales price in your target area
    e. Compiled a land value in your target area
    f. Compiled a final list of sites from your research data
    g. Obtained all the physical site statistics
    h. Know what land characteristics to look for in a development site
    i. Find and identify prospect development properties
    j. Quickly check if the site is developable – set backs, drainage
    k. Do a quick feasibility to see if it passes the litmus test
    l. Do a more detailed feasibility check
    m. Select the final prospect
    n. Do a conditional contract to secure the site and involve a team of professionals.
    etc
     
    QbiK Evolution, Propin and mrdobalina like this.
  10. QbiK Evolution

    QbiK Evolution Well-Known Member

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    Perth
    Great post ottg, so much great information there.
     
  11. Aaron Sice

    Aaron Sice Well-Known Member

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    Location:
    Ocean Reef, WA
    Quotes for truth.

    I live in Ocean Reef and while there are a few good duplex sites around with GF possibilities, rents and values still are suppressed.

    The marina isn't even on the forward budget estimates yet so despite the last 30 years of talks, values in the Mullaloo/OceanReef/Craigie/Beldon/Connolly areas ain't going anywhere unless you're in a housing opportunity area....but even then....
     
    MTR likes this.